Conference Agenda

Although prior research documents the effects of heat on labor supply and productivity, less is known about whether these shocks directly reduce workers' welfare through earnings losses. We address this question using longitudinal data from the SHARE panel matched with high-resolution E-OBS weather records, covering over 32,000 workers across 14 European countries between 1955 and 2018. Exploiting plausibly exogenous variation in heat wave exposure across cohorts within the same generation and location, and controlling for individual fixed effects and occupational sorting, we find that each additional heat wave day reduces monthly earnings by 0.31%, equivalent to an average annual loss of approximately $160. Heterogeneity analysis reveals that variation across occupations accounts for most of the differences in earnings losses, pointing to match-specific productivity as the primary driver. The burden falls disproportionately on low-income workers and those from disadvantaged backgrounds, suggesting that extreme heat reinforces pre-existing socioeconomic inequalities. Labor market institutions play a significant mediating role, substantially attenuating earnings losses where collective bargaining is centralized, binding wage norms are in place, and union coverage is high.